Taking A Shot With Chapter 7 Bankruptcy
Despite bankruptcy, the law mandates filers to exercise their choice: you can either file for Chapter 7 or Chapter 13 bankruptcy. If you have some assets that can be sold to repay your creditors and your wage is just enough to pay for your family’s living expenses, then Chapter 7 bankruptcy is for you. The debts will be forgiven but whatever little assets that you have will be liquidated and the proceeds distributed to your creditors. This will write off all your unsecured loans within 90 days after filing but the bankruptcy will appear on your credit record for 10 years. Before you can file for this type of bankruptcy option, you need to find out if you are eligible for it. How do you know if you are eligible for Chapter 7?
Are you eligible?
To be eligible for Chapter 7 type of bankruptcy, one must initially determine the ‘current monthly income’. The current monthly income is the filer’s average income over the last six months before the date of filing. This is compared against certain standards called ‘the median’ that considers certain variables like the size of the household and the state where you live. A current monthly income that is equal to or less than the standard qualifies to apply for this type of bankruptcy. If the income is higher than the median, then one must go through ‘the means test’ in order to file for Chapter 7 of the Bankruptcy Law of 2005.
The means test determines if the disposable income is enough. This is done by deducting from the current monthly income certain allowed expenses and mandatory debt payments if Chapter 13 bankruptcy is to be opted for. If what is left, after all the deductions is made, falls short of a certain amount (which serves as a standard), then that person can file for this type of bankruptcy. One can access in the Internet a tool called ‘means test calculator’ that considers applicable income and expense standards for the state, county and region where the filer resides. This makes the computation process easier, faster and precise and is most especially useful for people doing the filing without the help of a lawyer.
To qualify for the Chapter 7 bankruptcy (and even for Chapter 13), it is also mandatory that the filer submits to and complete a credit counseling with a credit counseling provider or agency accredited by the United States Trustee's office. This can be checked using the Trustee’s website (www.usdoj.gov/ust, and click "Credit Counseling and Debtor Education"). This is mandatory even if the filer is obviously incapable of doing a repayment plan (Chapter 13). Its purpose is to help the filer get back on one’s feet again. Counseling is again required at the end of the case before wiping out the debts to assist the filer to get a better perspective of finance management.
What can ruin your chances for Chapter 7 bankruptcy?
Aside from having a high current monthly income and not passing the means test, one cannot file for Chapter 7 if you have already filed for bankruptcy, either Chapter 7 or 13, within the last eight years or six years respectively. The filer is not also eligible if an application was made within the last 180 days but was dismissed by the court for reasons of violating a court order, the filing was deceptive, or you requested a dismissal yourself. The application for bankruptcy may not also be granted by the court if the filer attempts and was proven to have concealed assets to cheat on the creditors. This may come in the forms of unloading one’s assets to friends and relatives, concealing assets from the spouse during a divorce arraignment, false declaration of assets in credit documents and continuing credit on unnecessary conveniences and luxuries. Finally, all the bankruptcy documents need to be signed ‘under penalty of perjury’. Any deliberate omission of relevant information, use of false Social Security number, use of fictitious name will not just merit a dismissal of the bankruptcy case; it will also lead to the prosecution of the filer for fraud.
In these hard days of economic recession, Chapter 7 bankruptcy offers a legal way to extricate you from debts. It comes, however with repercussions and responsibilities.
